Republicans have made a permanent repeal of the SGR part of House committees' mandate as they prepare replacement legislation for the healthcare reform law.
A two-year fix would give Congress through 2013 to find a permanent solution. Without it, physicians face a 28 percent cut in their reimbursements at the end of the year.
The American Medical Association initial response Monday was favorable.
"The President’s budget includes a renewed commitment to permanently fix the broken Medicare physician payment system, which the AMA strongly supports," AMA President Cecil Wilson said in a statement. "It also contains funding to delay the devastating cuts scheduled to occur January 1, 2012 for another two years, which is important for providing stability in the Medicare system while a permanent solution is enacted."
While placating the AMA, the administration is proposing $62 billion in offsets that largely avoid other providers such as hospitals and home health agencies. Instead, the budget proposal offers up White House and Democratic priorities that have so far failed to gain traction in Congress.
For example, the budget proposes saving $2.3 billion by getting generic versions of biologic drugs to market faster. The White House wants the brand-name drug makers to have only seven years of market exclusivity, but the healthcare reform law settled for 12 years following years of debate.
The nation's biotech industry association said the move contradicted President Obama's State of the Union address call to invest in research and technology.
"Under this proposal, most biotech firms would be unable to recoup their investments in new medicines which ordinarily top $1 billon and involve 15 years of research and development," the Biotechnology Industry Organization said in a statement.
The budget would also save $8.8 billion by restricting generic manufacturers' ability to drop patent challenges in exchange for cash payments from drug makers, another proposal that has so far failed to clear Congress.
The pharmaceutical industry would turn out to be the biggest loser in the president's health budget. Pharmaceutical companies agreed to $80 billion in cuts to help pass the healthcare reform law, and less than a year after it was enacted, the Obama administration is asking for more.
"We think that the beneficiaries of Medicare and Medicaid and the taxpayers of this country deserve to have the best possible outcomes with the most effective and cost-effective medications, and this is a move in that direction," Health and Human Services Secretary Kathleen Sebelius told reporters Monday afternoon.
President Obama's Medicare chief deflected a question about which offset proposals he expected to receive the most opposition in Congress.
"I don't know yet," said Centers for Medicare and Medicaid Services Administrator Don Berwick. "I think there have been some very wise choices made about where the pay-fors are going to come from."
Jason Millman contributed to this article.
This post was updated at 3:40 p.m.